GBP/USD – Pound Showing Movement as British CPI Dips

On Tuesday, the British pound posted losses but then recovered, as GBP/USD trades in the mid-1.62 line in the North American session. Taking a look at Tuesday’s releases, British CPI continued to drop, posting a gain of 1.5%. In the US, inflation numbers remain soft, as PPI came in at 0.0% last month.

British CPI, the primary gauge of consumer inflation, continues to lose ground. The index has lost ground for two straight months, pointing to weaker consumer demand. There was no relief from PPI Input, as the manufacturing inflation index posted its ninth consecutive decline, at -0.6%. This was well short of the estimate of +1.0%. Is the UK economy slowing down? If so, an interest rate hike from the BoE may not occur later rather than sooner.

US inflation indicators remain soft, as underscored by weak manufacturing inflation numbers in August. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Meanwhile, US numbers wrapped up last week on a high note. Core Retail Sales improved to 0.3%, edging above the estimate of 0.2%. Retail Sales posted a nice gain of 0.6%, well above the estimate of 0.3%. There was excellent news from the UoM Consumer Sentiment, which bounced back from a weak reading in July and improved to 84.6 points, its best showing since November 2012. The forecast stood at 83.2 points. These indicators point to an increase in consumer confidence and spending, which underscore a deepening economic recovery.

Scottish voters will cast their ballots in a referendum on independence on Thursday. The most recent polls are pointing to a close vote, with many voters still undecided. If voters do choose to secede from the UK, this would create plenty of questions and uncertainty, including what currency an independent Scotland would use and how the national debt would be divided. A vote to split up the UK could lead to turmoil in the markets and weigh heavily on the markets. Traders should treat the referendum as a market-mover, as a close vote could have negative repercussions for the struggling pound.

GBP/USD for Tuesday, September 16, 2014

GBP/USD September 16 at 15:45 GMT

GBP/USD 1.6243 H: 1.6251 L: 1.6162

GBP/USD Technical

• The pound posted losses in the Asian session, putting strong pressure at support at 1.6141. GBP/USD rebounded in the European session and continues to move higher in North American trade.
• 1.6141 is providing strong support after facing strong pressure earlier.
• 1.6263 is an immediate resistance line. Will the pound break through this level? 1.6382 is stronger.
• Current range: 1.6141 to 1.6263.

Further levels in both directions:

• Below: 1.6141, 1.6000, 1.5864, 1.5731 and 1.5628
• Above: 1.6263, 1.6382, 1.6484 and 1.6605

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Tuesday, continuing in the direction seen a day earlier. This is not consistent with the pair’s movement, as the pound has posted slight gains. The ratio has a majority of  short positions, indicative of trader bias towards GBP/USD moving lower.

GBP/USD Fundamentals

• 8:30 British CPI. Estimate 1.5%. Actual 1.5%.
• 8:30 British PPI Input. Estimate +0.1%. Actual -0.6%.
• 8:30 British RPI. Estimate 2.5%. Actual 2.4%.
• 8:30 British Core CPI. Estimate 1.8%. Actual 1.9%.
• 8:30 British HPI. Estimate 10.6%. Actual 11.7%.
• 8:30 British PPI Output. Estimate -0.1%. Actual -0.1%.
• 12:30 US PPI. Estimate 0.1%. Actual 0.0%.
• 12:30 US Core PPI. Estimate 0.1%. Actual 0.1%.
• 20:00 US TIC Long-Term Purchases. Estimate 24.3B.

* Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.